Goa’s labour laws rigid, says Economic Survey of India

Reflecting complaints from local industry of long overdue
changes in labour laws, Goa is classified as an ‘inflexible’ state in labour
policies and placed third from the bottom in the index of labour reform in the
recently published, Economic Survey of India 2018-19.

The index is based on findings from 21 states. It reveals
Goa’s score in labour responsiveness as below average. The state gets a score
of about 16 against an average score of around 20. The score shows that the
state’s responsiveness to changing economic environment is poor and only better
than Chhattisgarh and West Bengal which are placed right at the bottom in the
index and generally regarded as among the worst places for doing business.

The index reflects the extent to which changes in labour
regulations have reduced transaction costs for industry. It indicates that, inflexible states suffer
from poor labour productivity.

According to the Economic Survey, flexibility in labour
laws makes a more conducive environment for growth of industry and employment
generation. “Flexible states grow faster because they attract more capita
(investment). Moreover due to rigidity in labour laws employers in inflexible
state prefer substituting labour with capital with labour,” says the Survey.

The Survey’s remarks are interesting because the state
faces a scarcity of jobs as existing industry is not expanding while new
industries are not being set up. To address the situation the government is
trying to amend the Factory Act by permitting night shift for women on the shop
floor. The amendment, if approved in the forthcoming monsoon session of the
state assembly will be the first major revision in labour laws in recent years.

The labour reform
index covers eight major legislations- the Industrial Dispute Act 1947, the
Factories Act 1948, State Shops and Commercial Establishment Act, Contract
Labour Act 1970, the role of inspectors, maintenance of registers, filing of
returns and union representation. Index points are based on the extent to which
procedural changes have resulted in lower transaction costs by limiting the
scope of regulations, clarity in application of regulations and simple
compliance procedures

Other states that are classified as inflexible are Assam,
Jharkhand, Kerala, Bihar. In all thirteen states are categorized as flexible
with Uttar Pradesh topping the index.

The index is actually for reforms initiated during the
period 2007 to 2014 and updated by the Economic Survey from a previous index
prepared by the OECD. However the Economic Survey has studied the effect of
reforms in labour laws using 2017 factory data from the Annual Survey of
Industries.

The analysis shows
that, states that have made changes in the labour laws and transited towards
more flexible labour markets are more productive in terms of output per
factory. “Furthermore the parameters are
either deteriorating or growing at a slower pace compared to the flexible
states.”

The Survey highlights the case of Rajasthan which in
order to become progressive on the shop floor has amended the IDA Act, The
Factories Act and the Apprentice Act. Thanks to the amendments industries in
Rajasthan do not need government nod for companies employing up to 300 workers
or for retrenching, laying off or shutting down units. Earlier the ,limit was
100 workers. A worker has to raise objection to termination within three years.
Earlier there was no timeline.

Rajasthan has also revised its Factories Act and
increased the threshold limit to 20 or more from earlier 10 or more. To encourage
skilling of youth, the stipend for apprentice is fixed at no less than minimum
wage. Further the government has to bear a part of the cost for apprentice
training. The number of apprentices per factory is predetermined by the
government.